COF

Is Wall Street Underestimating Capital One Financial (COF) Stock?

Capital One Financial may be undervalued with poor growth indicators, but the 17 analysts following the company give it an rating of hold. Their target prices range from $111.0 to $189.0 per share, for an average of $153.84. At today's price of $139.8, Capital One Financial is trading -9.13% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

Capital One Financial Corporation operates as the financial services holding company for the Capital One, National Association, which engages in the provision of various financial products and services in the United States, Canada, and the United Kingdom. Based in McLean, VA, the Large-Cap Finance company has 51,300 full time employees. Capital One Financial has provided a 1.8% dividend yield over the last 12 months.

Capital One Financial has a trailing twelve month P/E ratio of 11.0, compared to an average of 15.89 for the Finance sector. Considering its EPS guidance of $16.07, the company has a forward P/E ratio of 8.7.

On the other hand, the market is potentially undervaluing Capital One Financial in terms of its book value because its P/B ratio is 1.01. In comparison, the sector average P/B ratio is 1.76. The company's shares are currently -30.7% above their Graham number, which suggests that they are not trading at a fair value in terms of earnings and net assets.

If analysts are giving the stock a bad rating, it's likely that they are looking beyond simple valaution metrics and attempting to forecast the company's growth potential. For example, Capital One Financial has narrow margins as you can see in the financial summary below.

2018 2019 2020 2021 2022 2023
Revenue (M) $27,176 $28,513 $26,033 $25,769 $31,237 $41,938
Interest Income (M) $22,875 $23,340 $22,913 $24,171 $27,114 $29,241
Operating Margins 27% 24% 12% 61% 30% 14%
Net Margins 22% 19% 10% 48% 24% 12%
Net Income (M) $6,015 $5,546 $2,714 $12,390 $7,360 $4,887
Depreciation & Amort. (M) $2,396 $3,339 $3,501 $3,481 $3,210 $3,226
Diluted Shares (M) 320 230 110 444 393 383
Earnings Per Share $11.82 $11.05 $5.18 $26.94 $17.91 $11.95
EPS Growth n/a -6.51% -53.12% 420.08% -33.52% -33.28%
Avg. Price $86.49 $83.33 $71.55 $141.14 $129.38 $139.8
P/E Ratio 7.27 7.51 13.79 5.22 7.2 11.67
Free Cash Flow (M) $12,104 $15,752 $15,989 $11,612 $12,875 $19,614
CAPEX (M) $874 $887 $710 $698 $934 $961
EV / EBITDA 8.07 7.24 4.78 4.41 5.63 6.35
Total Debt (M) $49,503 $48,383 $39,871 $42,266 $47,832 $49,318
Net Debt / EBITDA 3.74 3.42 -0.1 1.05 1.33 0.6
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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